The Chinese government will continue to lower the value-added tax rate for the industries of manufacturing, transportation, construction, telecommunication, with the intent of cutting a total 240 billion yuan (US$38.17 billion) in tax for the year ahead, Yicai.com reported.
The State Council executive meeting on Wednesday decided to decrease the VAT rate for the manufacturing sector from 17% to 16%, while reducing that of the transportation, construction, telecommunication sectors and agricultural products from 11% to 10%.
Meanwhile, industrial and commercial enterprises whose annual sales are less than five million yuan are defined as small-scale VAT taxpayers, updating from the previous 500,000 to the 800,000 yuan standard.
It also allows companies that have registered as general taxpayers to transfer to small-scale taxpayers, so as to enjoy preferential tax rates.
In the past five years, a total 2.1 trillion yuan of tax has been unloaded through the implementation of VAT reform.
The taxation system in China is different. It was efficient to tax production at source rather than via income tax. Hence foreign imports enjoyed a cost advantage against local manufacturers. It also is the root cause for the chinese travellers to find that similar items produced in China and sold overseas were cheaper.
The structure of the economy is changing and China is adjusting its taxation system slowly towards a progressive income tax system to tax high income earners more, reduce the tax burden on the low income and address the growing income disparity .